Margin of error
The 'plus or minus' around a result from a sample: how far it could easily be from the true answer just because of who happened to be picked.
In plain English
Every random sample wobbles a little. The standard error measures that wobble, and the margin of error is about two standard errors. It shrinks with the square root of the sample size, so four times the data gives half the error. A poll of about 1,000 people has a margin of roughly plus or minus 3 points.
Uncle Gary explains
Uncle Gary asks 10 people at the pub whether they like his chilli, and 7 say yes. '70% approval!' With only 10 people, the margin of error is nearly 30 points either way.
Why it matters for your money
A strategy that won 60% of 20 trades could easily be a coin flip that got lucky. Small samples produce dramatic numbers.
Where we tested it
- Lesson 6: Why Polls Only Ask About 1,000 People
- Lesson 9: Between Two and Six Pints: Confidence Intervals
- The Group Chat Vote: 80% Want Christmas at Ours
- Lesson 14: The t-Test: Is the Difference Real or Just Noise?
- Lesson 17: The Central Limit Theorem: Why Averages Become Bell Curves
Related terms
All glossary terms. Educational content, not financial advice.